From Rob Why Henderson Homebuilding Isn't Coming Back

Thanks to Bill Finn and John Coomes for sending us this.


This analysis of Henderson homebuilding seeks to answer four questions: (1) why aren’t more new houses being built in Henderson? (2) what about the existing home market? (3) why is home ownership declining? and (4) what can Henderson do about it?

Why aren’t more new houses being built in Henderson?

The short answer is lack of effective demand. Demand for a product is not enough- that demand must be backed up with the purchasing power to afford and purchase that product and that purchasing power is lacking in Henderson.

A new 1,600 square foot average quality home with a garage, porches, patio, etc. will cost roughly $110 per square foot or $176,000 to build. Add in the lot and you are talking about say $200,000 to purchase a new house. If one takes out a 95% loan-to-value loan the mortgage payment would be $1,302.89. (25 year loan at 4% with $300 per month for insurance and property taxes collected each month as a part of the payment). Prudent lending practices dictate that the borrower should not spend more than 25% of his/her pre-tax income on a mortgage payment. Dividing $1,302.89 by 40 hours gives a needed wage of $32.57 per hour to qualify for a mortgage on this hypothetical new house.

Read more here.